Watchlist 04-21

Getting back to some idea generation, and decided to provide a peek behind the curtain here at TVP headquarters.  These are stock ideas that I find attractive based on long term (10+ years, if applicable) volume profile analysis as well as presenting favourable (sic) patterns on the weekly charts.

These are not ‘hit and run’ type trades.  A few, if not all may take weeks/months prior to showing promise, but they are all offer very nice reward/risk at these current prices.

Below you will find daily charts with 4 ‘levels’ highlighted.  I have set a target price for each stock and have provided a stop level depending on what level of reward/risk you seek.  Using these levels, one can find candidates with a favorable reward for a set level of risk.

I realize this may be a bit confusing, so feel free to ask questions, and I’ll be happy to clarify.

AEIS

AEIS Daily

ALKS

ALKS Daily

BMY

BMY Daily

DECK

DECK Daily

DHI

DHI Daily

DXCM

DXCM Daily

EHTH

EHTH Daily

GCAP

GCAP Daily

LIOX

LIOX Daily

LVS

LVS Daily

MASI

MASI Daily

NVAX

NVAX Daily

PHM

PHM Daily

RBCN

RBCN Daily

RUTH

RUTH Daily

WM

WM Daily

Portfolio Update

Due to a market timing algorithm that I have been using for years making the flip from “green” to “red”, I have liquidated 25% of my stock portfolio at the close yesterday (all trades are updated in the appropriate link under the “Trades” tab above).  I will continue to liquidate 25% of my portfolio every day as long as this indicator remains “red” until I am 100% cash or it flips back to green.

While I do believe that we have put in a ‘tradable’ bottom the past couple of days, using this algo keeps me safe from making wildly inappropriate subjective financial decisions with a ‘relatively conservative’ portfolio of stocks.  Thus this liquidation is a purely mechanical reaction, as it helps me to reduce exposure and takes the emotion out of trying to game the market.

Even if my portfolio has taken on some water this month, I still remain within 5% of my high water mark from the start of 2013 as can be seen in the column furthest to the right here: HISTORICAL PERFORMANCE.

My ACTIVE PORTFOLIO, shows that my cash level is up to 41%, and I have significantly reduced my level of risk with just one round of liquidation.  Even though I am realizing some losses after a 10% market decline, reducing exposure in the face of potential further downside gives me peace of mind.

Should we rally from here, and my algo flips back to “green” I still have decent long exposure, and plenty of cash to put to work looking for bargains.  IMO, it’s a win/win.

Keeping an Eye on Momentum

A couple of weeks ago, I mentioned on the various social media outlets I frequent that many of the beaten down momentum stocks appeared to be in the beginning stages of setting up on the weekly charts.

Well this evening I come bearing good news: several of these names have patterns that are now in full bloom. Allow me to share my favorites with you (along with a couple bonus ETF’s).

YELP

YELPI love this pattern.  I highlighted YELP the other day, focusing on volume profile analysis as a means to help us locate a range of price in which we can expect to find support.

Today, I am using my eyeballs and 15 years of looking at charts to tell me what I need to know.  This is a low risk, high reward setup.

There is a lot of supply around 60 (look at that 4 month base at the end of 2013), so after slicing $40/share off of the price in a month, I believe that the bears will not be able to muster the energy required to move through this area.

Set your stop at 57 and build your position.  I like to stay on the conservative side with price targets, so in the event of a rally, I’m looking somewhere between 70-75.  I could see YELP rallying to this spot and coming back to retest 60-65.

Earnings: 4/28

DATA

DATAThe price action on DATA is really quite similar to YELP, even down to the actual price per share.

Stop: 57.50

Target: 75

Earnings: 5/5 AMC

FEYE

FEYE

I would feel more comfortable if FEYE was trading down into that previous range between 35-40, but this pattern is too nice to overlook.  My stop is more arbitrary than I would prefer, but I also think it provides enough cushion to build a position.

Stop: 41.5

Target: 60-65

Earnings: 5/6 AMC

IBB

IBBFor a few weeks I have been updating this IBB chart vs. a projected price pattern that I devised.  Ah, here it is:

IBB

No, I have not moved the lines to create some sort of revisionist history in order to boost my chart reading street cred.  You are welcome to go and peruse my Stocktwits archives for confirmation.

Stop: 200

Target: 240

TQQQ

TQQQThe pattern that QQQ is making is quite rare for a ‘major’ market ETF.  I use it all the time for individual stocks, but I don’t have the chance to employ it very often on the market as a whole.  TQQQ gives you the chance to own QQQ at 3X power.

Stop: 51.50

Target: 61

Feel free to leave questions in the comments and/or hit me up on StockTwits/Twitter, I am more than happy to help.

Finding Support

Last evening I posed two scary thoughts.

The first I addressed indirectly in a few tweets.  Using IWM, I have noticed that since the tenor of the market has shifted (using early March as the genesis), moves lower have tended to be at least 2-3 day affairs with very large thrusts lower among those 2-3 days.

Unfortunately, yesterday was day 1…and it came basically without warning.  A heinous bull trap of fantastic proportions.

I expect today to be as ugly as yesterday.  If it is not, or we get a reversal, then that will signal a character change in the market.

The latter ‘scary point’ was in reference to a catalyst for this sell off in high beta, momentum stocks.  I believe that we are seeing the other side to the “low volume melt up” equation.  These stocks forged higher into the uncharted realm of all-time-highs and rarely paused.

‘Sideways’ trading in a security means that buyers and sellers are coming to a general agreement on price, i.e., value.  When something goes in one direction for an extended period of time, without the establishment of ‘value’, why would anyone be inclined to buy (or sell in the opposite case) said “something” when the price moves back through the same region?

Look at the volume profile on YELP right around the top on March 10th.

YELP 3-10

 

The stock plowed higher starting at the beginning of 2014, going from the mid 60’s to 100+ in 2 months.  If sellers wanted to press the issue (and clearly they have), then the first viable area of “value” (based on where buyers and sellers have, historically, come to an agreement on price) is between 62 and 70.

Well, whaddaya know?  Look at where we are now.

YELP

We are getting close to judgment day with this stock.  If YELP cannot find support above 57 (I’m being generous here, using the November lows to make that claim), the gap fill down around 42 is in play.

As an aside, this is why I do not use trend lines.  I believe buyers and sellers use price to determine the value of a stock, not a mystical line that connects some dots.  Stocks tend to find support/resistance where buyers and sellers have historically come to an agreement on price.

Pull up any of your favorite momo names, and plug in the volume profile to your chart.  If you want to try and play a bounce, use that as your guide.

TREE WELL MARKET

headerimgsisTree wells are popping up all over as we weave our way through this backcountry,  They sneak up on you, suck you in, and then suffocate you until you most likely perish.

Fun stuff.

To the surprise of no one, my portfolios both took on egregious losses earlier today.

Scary item 1) The selling never felt exhaustive.  Scary item 2) why are some of these stocks selling off so furiously?

There is no news.  None.  Usually there is at least some sort of horseshit overseas crisis to scare us.  This is eerie.  Really good traders are teetering on the edge of disaster and the S&P is within shouting distance of all time highs.

Does that strike anyone else as a little peculiar?

My spirit has not been broken, but this is difficult.

In terms of how I plan on approaching this: my time frame is going to drop from “weeks/months” to “days”.  I will start by looking for trades of 1 week or less in duration.

Exhaustive moves lower.  Bull traps higher.

Yesterday was cruel…just an abomination of all of the shit we have talked on bears since 2009.  Today was but one day, and there will be more to come, no doubt.

I was hoping for a move lower “sooner rather than later”…and, well…I received that.

I can hold my breath for a while here.  My option positions have time.  I believe there will be a rally of a more significant nature prior to June (when many of them start to expire, I also have equal distribution in July, August, and September).

My stock portfolio (updated in the AM) had it’s largest single day decline ever today.

I think part (or maybe most of) my stubbornness to sell and start going short is because I have been struck down by this bull market countless times since 2009.

The most egregious being:

  • Loaded on EDZ and VXX in Sept 2010.
  • Long an assload of BAC puts in January 2012.
  • Long, egregious amounts of QQQ puts around Thanksgiving EDIT: 2012.

Those three trades have contributed to the vast majority of capital losses I have incurred in the past 4 years.

I suppose a little ‘hedging’ never hurts in times like this.

In the process of writing this post I have come across some thoughts on why some of the best stocks of 2013 are selling off with no end in sight, and I believe it has to do with volume.

More on that in the morning.

Thoughts on Subscription Services

In the aftermath of this Keiko Kawamura “hedge fund”/subscription site scam, I have been pondering the purpose and value of subscription based services.

Clearly, with this nonsense being unearthed, anyone with a heartbeat and an internet connection can create a fake track record, acquire a bunch of followers based on this false track record and get people to pay them $175 a month for access to their “real-time” trades.

I suppose being a cute 20-something Hawaiian girl doesn’t hurt.

A few of the people I follow on Twitter posted links to several of her “webinars” last evening, and I was throwing up in my mouth after listening to 2 minutes of her drivel.

Allow me to digress for a moment…for example, she states (I’m paraphrasing here): ‘Guys, you can literally, like (sic), drive yourself crazy looking at charts all night and start to see patterns that really aren’t there’.  Um, sure, there is some truth to that.  There is also a lot of truth to the fact that stock charts represent a visual representation of human behavior in a marketplace.  Humans also tend to devolve to more base instincts and repeat behaviors in a predictable manner over time in emotionally charged environments (i.e., the stock exchange).

This is how I utilize pattern recognition as a primary source of analysis in my trading.  The patterns I see are patterns that I have noticed on charts for as long as I have been trading…and I presume they have existed long before I was even born.  Of course they are not right all of the time, but they do give me an edge, one that I can combine with strict risk management protocol to provide a foundation for my trading strategy.  </rant>

I feel bad for the people she ripped off, mostly because I feel like they did not know any better.  They were looking to make money and thought that this cute girl had an amazing talent as a trader and could help them make money in the market.

They were duped.

Why someone would spend $175 a month on a service and not want to see some tangible results over a significant period of time prior to forking over their (presumably) hard earned money, is beyond me.  Also, by paying $175/month, what were they receiving?  After watching two minutes of one of Ms. Kawamura’s videos, clearly it was not an education.

Do people join subscription services like this merely to be spoon fed trades that are going to generate (alleged) absurd returns?

If you are thinking about joining a subscription service, here is a good bullshit indicator: if someone is purporting to be able to generate ridiculous profits (800+% in this case) in the stock market, they are lying.  If you are paying that person for their “guidance”, they are going to steal your money.  Additionally, they are going to provide no sort of educational content nor actionable trading ideas.  It is that simple.

You have $175/month to spend on that tripe; therefore you clearly you have the mental capacity to make enough money to support that habit…use your fucking head.

I have long thought about starting my own subscription based service.  No, I am not joking.  This nonsense has given me extra incentive to bring those ideas to fruition.

I manage two actively traded portfolios, write my thoughts on my trades and the market on this blog relatively frequently, and conduct many hours of research all while ‘earning a living’ working 40 hours a week as a civil engineer.  Hell, I could spend 20 hours a day talking about and researching trading opportunities in the stock market.

I know, I know: “if you are so good at trading, then why do you need to hock a subscription based service?”  That is a legitimate question and a polarizing topic.

I look at it like this: I don’t have enough time in my day to spend on R&D.  I can manage my portfolios and find a few good ideas in the limited time that I do have.  If I can expand upon the time I spend doing research and collaborating with/mentoring novice and intermediate level traders on the fundamentals of trading and risk management, it is a win/win for everyone.

Let’s be honest, shall we?  My trading accounts cannot (and will never) provide for my families living expenses.  I guess that does not make me a “professional” in the classic sense, but I put in as much, if not more time every week into the market than I do ‘actual’ work.  Thus, while I may not make my living from the stock market, I certainly approach it as if I do.  It is a labor of love.

I have grown weary of seeing people ripped off by internet snake oil salesmen (or saleswomen, as it were), and seek to provide a juxtaposition to that nonsense.

Look, you can read through the archives of this blog and see that I am not one to bullshit you, my dear reader (no patronizing).  My goal here is to help traders, provide information and entertain, all of which helps me become a better trader.  I am transparent…probably to a fault when desiring to undertake this sort of venture and thus can provide a service that is the polar opposite, in every way, to what Ms. Kawamura was providing, for a fraction of the price.

I am not ready to “go live” with this venture, but the wheels are in motion.  Hate on me if you must, but this train is building momentum and I have no intention on hitting the brakes.

More on this to come.

wasted-food1

Digging Through the Trash

Ugh, looking through these charts, I am taking note of the sheer quantity of festering carrion populating my options portfolio.  Thankfully (I think) my account balance is being supported by the likes of the following handful of stocks: X, AKS, COP and WMT (all up near or over 100% from my basis).  NOV has been up and down (currently up).  The P/L on the remaining names looks like garbage.  Lets pick through the trash to see if we can find an unopened bag of Fritos to snack on, shall we?

I wish I had more time with the ANGI May 17.5 calls.  This stock is bottoming, unfortunately I don’t think there will be enough time to salvage much premium on them unless she gets moving quickly and with extreme vigour (sic).  Earnings are also looming prior to expiration (4/21), so it appears this position has turned into an earnings lotto.  That’s fantastic…actually, no, it isn’t.

I added to these BMY Sept 57.5 calls again today at 0.88.  The weekly still looks good and I think it will find support above 47.5, thus I will continue to add into weakness like a psychopath.  Earnings on 4/29

CAMP is a new position (June 30 calls).  I started it yesterday at 1.05 and added today at 1.10.  I LOVE the look of this one and think it can rebound to 30 in short order.

COG is either going to “V-shape” to 37+ or is about to retest the lows around 32.  Obviously I’m pulling for the former, but I have a feeling the latter is a more likely outcome.

Ah yes, lets talk about this awesome position in DDD.  There are many StockTwits users suggesting that this stock is destined for the 40′s in the coming days.  While that may be true, I wouldn’t put past the idea of this pulling a Lee Corso (I shared an elevator with him one time) and says “not so fast my friend”.  I see far more risk (one month out) being short than long at these levels.  The price of the stock has been cut in half in 3 months and has also entered the upper portion of an area of value from last year that exists from about 41-50.  If this stock rallies, the high of the February bounce remains my target.

DHI qualifies as a “not so bad” position.  A) because it is small and 2) because it is right around my basis.  I always have a tough time reading these homebuilders…so I’m not exactly dying to take on additional risk at this juncture, but I do like the prospects of a return to 24-25 should the stock rally.

FIG sucks. It is a rotting piece of raw chicken and is stinking up this entire portfolio.  Moving on.

GM needs to move higher, soon, or it looks like it is about to take another leg lower…much to my chagrin.

GNTX also sucks.  Even more amusing is the fact that I called this move lower a couple of weeks ago…you can search through the archives to see for yourself.

Wow, we are really into the Skid Row of options positions now as we come to IGT.  Looks terrible, still plenty of time left on these calls though, and this stock tends to make psychotic moves…so I’m not going to write this one off just yet.

I maintain my thinking that MA is going to put in a bottom here.  With that in mind I added to my July 83 call position today, as I was the asshole buying at 0.61.  My basis is down to 1.39 (lol), so if we can get a rally into the high 70′s I am going to put the bandanna over my face, pull out my revolver and steal back my money (plus some).

Interesting to note that MS has stalled out right at the cusp of a very significant volume void that exists from 31, basically to all time highs in the 90′s…no, I am not shitting you.  If you read this blog with any regularity, you know that stocks often stall/consolidate right at the cusp of the volume void.  So, I will be watching MS VERY closely to see how it handles trading around 29.  I like the way the stock looks on the weekly chart here, and if it can trade in a ‘productive’ manner in this area, I will look to add more contracts and lower my basis.  FWIW, I am in the July 34 calls.

UPS is the last of my losing option positions.  I have had the toughest time trying to get a read on this stock.  Last week it looked as if it were ready to blow through 99 and march directly back to all-time highs.  I still think that is on the table, but I would really like to see that happen this week.  Looking at the UPS chart, I see a stock that has stalled between 96 and 99.  Some may call this a “consolidation”, and while I can see that, I am not thrilled with the ‘look’ of it.  Basically I feel like it is taking much too long to move higher.  The longer a stock stagnates in a trading range, the less reliable I find the pattern to be.  There is definitely a sweet spot in regard to ‘length of consolidation’.

So, what did we learn:

BMY and CAMP are new positions that I am quite bullish on.

DHI is still in good shape,

ANGI, MA, and UPS are ‘ok’ (even if I am showing a large unrealized loss).

COG, DDD, GM, and MS are of questionable repute, but are not total garbage.

That honor is saved for FIG, GNTX and IGT…the veritable triumvirate of shit.

At last check, the account balance was in the 12.7k range.

male-lion

In the Tall Grass

As I sit here casually watching the market sell off from another green open, I have decided to take a position waiting in the tall grass, waiting for IWM to come to me.  I bought a starter in the April 116 calls at 0.35.  I have bids out to buy more contracts at a lower cost.

In other news I am looking to add to BMY and CAMP.  In the event of a rally, CAMP will be trading around 30 before you can order your stupid 7 word drink at Starredbucks.

This MA position of mine has been bludgeoned, but I like how it has been trading near the bottom of this range.  The question is: should I add to my existing position, or buy something at a lower strike price.  My contracts expire in July, and I do appreciate how many people are becoming bearish on this stock all at once (since I tend to use internet trader sentiment as a contrary indicator).  Yes, it *is* difficult to buy when everyone thinks a stock is going lower, but those times usually offer the best risk/reward.

In short, I am confident this market will bounce in the coming days.  The reaction to the bounce will be telling, and I will need to be vigilant in assessing (as objectively as possible) whether to hold many of these option positions or start to unwind them into strength.  If I deem the latter scenario to transpire, I will actively start looking for shorts (via inverse ETFs or puts).

UPDATE: I added IWM April 116 calls at 0.51 and 0.58.

I also added to (and did not initiate a new position) the MA July 83 calls at 0.61, thus bringing my basis down to 1.39.

The Need for Adaptation

Today the items of my options portfolio, stocks that had been keeping me afloat for the past 3 weeks, decided to play along with everything else and cordially drop by 4-6% across the board.

Names like AKS, NOV, COP, and X had scoffed at ‘momentum stock weakness’, while piling on a cool 20% (in some cases).  In an ironic twist, those aforementioned stocks had taken on a momentum of their own in recent weeks, and now received the same ‘comeuppance’ the favorites of 2013 have received of late.

Some had come a long way…quickly.  Pullbacks are to be expected.

The psychology of dealing with pullbacks in different market environments is intense.  Normally I would be licking my chops to add to some of these stocks…that is what the QE3 rally has conditioned me to do.  I need to adapt to the changing conditions.

Through the wreckage I made the decision that I was not going to sell anything today.

Hold on, that is not entirely true, a stop was hit on an old position in GDOT.

Everything in my damn portfolio, both stocks and options, is getting picked apart.

Not to be deterred, I refused to let something like a little unrealized capital losses dampen my mood for more risk, so I started a position in CAMP, buying a small starter of common and a single June 30 call contract at 1.05.

Tomorrow is another day.